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Domestic mortgage defaults: the second shoe

  • 21-11-2010 5:33pm
    #1
    Monty Burnz
    Closed Accounts Posts: 12,455 ✭✭✭✭


    Following on from the closed thread here:

    http://www.boards.ie/vbulletin/showthread.php?p=69137549#post69137549

    Scofflaw locked the thread because, as he points out, the idea is that our new debt will be used to pay off our old debt, so the €212 figure for our debt at this stage is incorrect.

    I agree with Scofflaw on that, but I would like to raise the point that almost nothing has been set aside by the Irish banks to cover domestic mortgage defaults.

    What do we believe the total level of these defaults will be? How much will the average default cost the 'banks'? (i.e. the taxpayer)

    And what are the implications of this train-wreck that is coming down the road?


Comments

  • #2
    Monty Burnz
    Closed Accounts Posts: 12,455 ✭✭✭✭Monty Burnz


    BrickLayer wrote: »
    If every indebted homeowner,who bought a house in the 00's decided to default and were enabled to hand the keys back straight up,i think there would be a lot of bankers in the ****,we should have let them burn then we wouldnt have to worry about these white collar criminals..
    Remember that the banks' debts are now Ireland's debts thanks to Brian Lenihan and company, so it would be the taxpayer in the ****.


  • #3
    Dannyboy83
    Registered Users, Registered Users 2 Posts: 4,236 ✭✭✭Dannyboy83


    Monty Burnz wrote: »
    Following on from the closed thread here:

    http://www.boards.ie/vbulletin/showthread.php?p=69137549#post69137549

    Scofflaw locked the thread because, as he points out, the idea is that our new debt will be used to pay off our old debt, so the €212 figure for our debt at this stage is incorrect.

    I agree with Scofflaw on that, but I would like to raise the point that almost nothing has been set aside by the Irish banks to cover domestic mortgage defaults.

    What do we believe the total level of these defaults will be? How much will the average default cost the 'banks'? (i.e. the taxpayer)

    And what are the implications of this train-wreck that is coming down the road?

    This was precisely the point I was coming around to make - unfortunately it was locked.
    This 120 billion is only the first bailout.

    As Morgan Kelly suggested, if the ECB tell Irish banks to bring lending back to a level covered by their deposits - then lending will cease entirely and houses will be bought for cash.

    So are we going to recapitalise the banks (add the debt)
    OR
    are we going to refinance the debt (don't add the debts)

    The answer is that the money will be used to recapitalise the banks - this has been the objective all along.

    In reality, this bailout is just the first in a series of bailouts or before we leave the Euro and default.

    Reason for that is because we need to cut 7.5 to 10 billion off the public sector wage bill over the next 4 years, and about the same from social welfare.

    Given that the Irish public sector have been the best paid in Europe for a number of years, they own a large percentage of the 800,000 mortgages.
    Meaning when their pay is reformed, they will have the largest percentage of defaults.

    So our sovereign debt is 92 billion now.
    And we are borrowing 120billion, to either 'refinance the sovereign debt' or 'recapitalise our banks'.

    My guess is that we are borrowing 120 + 92 now, and later, when they realise we are a bottomless pit, we will be ejected to save the eurozone.


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